A significant shift is underway as to how industrial software is being procured, from traditional, perpetual software ownership to subscription and cloud deployment. As digital transformation continues to accelerate, software-as-a-Service (SaaS), subscription licensing models – including on-premise – and cloud solutions increasingly offer new, more appealing options for end users.
For software suppliers to encourage a long-term, mutually beneficial relationship with their customers, they must transform, moving from a traditional reactive focus to being proactive in helping their customers be successful in achieving their business goals, and accelerating adoption and product value throughout the life of their solutions. This is critical, as end users are moving into the era of the digital enterprise where all product design, manufacturing processes, services and support, and customer experiences are connected by a digital thread that merges the virtual and physical worlds.
Subscription for software licensing has shifted the industrial software market. Many suppliers now offer subscription options. ARC Advisory Group anticipates subscription-based models to grow at a pace nearly four times that of traditional software licenses over the next five years in the industrial software market.
With subscription, users are empowered to leverage leading technologies and respond to evolving market demands, enhancing agility, and accelerating transformation and growth. The transition from perpetual licensing to subscription has lowered the barriers for adoption in several areas, such as much lower first-year costs and costs being funded as operating expenses (OpEx) rather than capital expenditures (CapEx). Most end-user organizations prefer bundled services for the software, support, and upgrades and paying for it using a regular OpEx budget rather than going through the often long approval process for CapEx funding. This can reduce first-year software costs by up to 65 percent. With subscription, support services generally include software version upgrades and maintenance, as well as access to 24/7/365 remote troubleshooting and technical support. In the industrial sector, where software frequently requires implementation and deep domain expertise, the quality of the support users get when acquiring subscription software can dramatically impact the outcomes they get from the software.
Cloud-based solutions are flexible, allowing universal access to data, introducing a collaborative environment for remote workers across the globe, and addressing security and availability demands. They can also lower the cost of entry, provide near-limitless scalability, and they inherently include a routine, “automatic” schedule of software maintenance and updates. This eliminates much of the cost and overhead associated with owning and maintaining an in-house IT infrastructure.
Unlike perpetual software licensing where software is purchased outright at the start, subscription solutions begin with a fraction of the initial “full” product cost. That is typically a big advantage for users, as they pay over time rather than upfront for product functionality, and if they don’t feel they are getting the value from their investment, they are able to re-evaluate periodically and make adjustments.
For software suppliers, however, it means revenue is received over time, only a portion coming early on. To ensure long-term customer relationships and minimize churn, suppliers must help ensure that their customers can optimally use their software and that they are able to meet the business objectives they acquired the software to achieve. Now, more than ever, suppliers need to be focused on their customers’ success.
As part of the selection criteria for industrial software investments, users should look for a vendor that offers programs and services that balance reactive issue resolution with proactively driving onboarding, adoption and success.
